Boston, MA -- (SBWIRE) -- 08/28/2012 -- BMI View: We maintain our subdued outlook for France's grain production in 2012/13, as cold snaps have destroyed part of the crop, and recent rains were not sufficient to push yields higher. In the dairy segment, producers are being hit by weak economic growth in Europe, where French dairy companies, such as Danone, sell a lot of their products. Livestock producers are being hit by weak margins; recent pressure faced by French poultry group Doux exemplifies the difficulties faced by the poultry sector.
- Wheat production growth to 2015/16: 3.8% to 39.6mn tonnes. We expect modest growth in output over our forecast period owing to possible cuts to farmers' subsidies. In addition, French agricultural exports face increasing competition from the Black Sea region.
- Poultry consumption growth to 2015/16: 5.8% to 1.7mn tonnes. Poultry's perception as a healthy alternative to red meat, as well as its affordability in the sluggish economic environment, will encourage demand growth.
- Milk production growth to 2015/16: 8.0% to 25.9mn tonnes. Consolidation in the dairy industry will allow producers to take advantage of rising quotas and export demand, helping to support growth.
- 2012 real GDP growth: -0.2% (down from 1.8% in 2011; forecast to average 1.3% over 2011- 2016).
- Consumer price inflation: 2.2% annual average in 2012 (slightly up from 2.1% in 2011).
- BMI universe agribusiness market value: 10.5% year-on-year (y-o-y) decline to US$47.4bn in 2011/12, forecast to decline 1.1% annually between 2010/11 and 2015/16.
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After a nearly 8% y-o-y dip in France's wheat output in 2011/12 due to unfavourable weather conditions, we expect production to remain subdued in 2012/13 and to grow by only 2.3% y-o-y to 36.0mn tonnes. We revised down our 2012/13 production forecast in early April but remain optimistic that the crop will expand, as the long stretches of exceptionally dry weather have given way to rains in key growing regions in recent weeks. That said, as a result of the subdued production levels, French wheat exports are expected to decline by 18% y-o-y in 2011/12, to 16.8mn tonnes, according to the French farm body, France Agrimer. We expect French exports to rebound in 2012/13 on the back of growing output and higher-than-expected stocks.
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